Charlotte Hassan: Surprise! YouTube Slashed Its Royalty Rate by 50% Last Year

YouTube and Vevo streams increased 132% last year, but revenue paid to artists only increased 15%. Make sense?

The argument over whether YouTube is paying labels and artists fairly has been intensifying for some time. But, that argument is about to reaching a boiling point following recent findings.

Here’s the bombsell: Midia Research has now concluded that the revenue paid to music labels and artists halved last year relative to the number of streams. That is, dropped by 50%. This translated to a potential revenue loss of $755 million for the industry

The numbers are easy to calculate. Last year, streams on YouTube and Vevo grew 132%, but revenue to rights holders only increased by 15% within the same time period. As a result, the streaming platform’s already low per-stream royalty rate dropped from $0.002 per stream in 2014, to just $0.001 in 2015 (according to Midia).

Looked at from another angle: if the per-stream royalty rate had remained constant, music labels and artists would have earned double.

The discovery could provoke a massive reaction from the music industry. The main issue that artists and labels have expressed is that streaming services like Spotify and Apple Music pay rights owners a per-stream royalty rate regardless of the revenue they earn. By contrast, YouTube pays a share of their revenue. “Labels are not used to being paid based on how profitable the company is,” said Mark Mulligan, analyst at Midia Research.

So what’s going on? The reason why labels and artists are being paid less — despite a boom in streaming — is reportedly because ad prices dropped last year, which ultimately reduced ad-revenue.

The drop represents the latest face-slap from a company increasingly viewed as hostile.